Microsoft Cloud Growth Impresses

Microsoft has reported stronger than anticipated growth in its cloud division, driven by increased spending on AI infrastructure. The company's cloud revenue reached $40.9 billion, marking a 21% year-over-year increase. This growth is fueled by the demand for AI services, prompting Microsoft to invest heavily in expanding its AI capabilities.

Microsoft's capital expenditure for FY2025 is approximately $80 billion, with a significant portion allocated to AI infrastructure, including data centres and custom silicon. This investment aims to secure GPU capacity and expand data centres to meet the growing demand for AI-as-a-service. The company is also focused on sustainability, incorporating carbon-negative technologies and renewable energy solutions into its data centre operations.

Despite increased spending on AI infrastructure, Microsoft's Intelligent Cloud segment maintains a strong gross margin. The company's AI business has surpassed an annual revenue run rate of $13 billion, demonstrating the success of its AI monetisation strategy. Microsoft's strategic investments in AI and cloud infrastructure are expected to drive long-term revenue growth and solidify its position in the tech industry.